On July 14, 2014, Ontario Finance Minister Charles Sousa will rise in the legislature and deliver the May 1 budget for a second time — with few, if any, changes.
Most people, I suspect, will focus on things like the $29 billion in proposed infrastructure spending, or the $2.5 billion Jobs and Prosperity Fund. Fewer will pay much attention to the Ontario Retirement Pension Plan (ORPP) which will also be included in Sousa’s budget — a “made-in-Ontario” supplement to the Canadian Pension Plan (CPP) intended to help middle-income earners save for retirement.
“There’s pretty much wide agreement among leadership across the country,” Premier Kathleen Wynne said on May 12, “that there’s a real problem and that people in their 20s and 30s and 40s are not saving enough.”
Here’s how it would work: The new legislation would make it mandatory for workers to contribute 1.9 per cent of their annual income — up to a maximum of $90,000 — to the ORPP. Their employers would then be expected to match that contribution — again, up to a maximum of $90,000.
The aim would be for the ORPP to replace 15 per cent of an individual’s working income upon retirement. Those just entering the workforce, earning between $45,000 and $90,000 per year, would benefit the most from the plan.
For instance, a worker earning an average of $45,000 a year throughout his or her working life would contribute roughly $66 per month, or $788 per year, into the ORPP, according to Liberal budget documents. If this worker works 40 years and retires at age 65, he or she would receive about $534 per month — or $6,410 per year — for life.
Combine this with CPP benefits and our fictional worker would have something on the order of $1,424 per month — or $17,090 per year — to live on.
A worker earning an average of $90,000 a year throughout his or her working life would contribute roughly $137 per month — or $1,643 per year — into the ORPP. If our worker in this example works 40 years and retires at age 65, he or she would receive about $1,068 per month, or $12,815 per year, for life.
Again, combine it with CPP benefits and this person would have something like $2,106 per month, or $25,275 per year, to live on.
When you combine the Liberals’ retirement-savings tax grab with the new $11 per hour minimum wage, it’s not hard to see why so many small- to medium-sized businesses are beginning to search for greener pastures.
The real question, of course, is: Do we really have a retirement-savings crisis? After all, the ORPP is only for those who don’t already have a government or private pension plan of their own in addition to the CPP, and deductions aren’t scheduled to begin until 2017 at the earliest.
I guess it depends on who you ask. Wynne and the Liberals will tell you that we do indeed have a retirement-savings crisis and say that if we don’t act now, we’ll be in real trouble down the road. I like to call this the “sky-is-falling” approach.
Others, like the Canadian Federation of Independent Business (CFIB), say the Liberals’ scheme is nothing but “a tax grab” — and a job-killer to boot — and insist we don’t really have a retirement-savings crisis. What we really have, they say, is a government bound and determined to put business out of business.
I like to call this “the truth”.
In a survey conducted by the CFIB shortly after the Liberals’ budget was introduced for the first time on May 1, over half of the respondents said the additional payment the ORPP would require them to make likely would force them to reduce staff to cover the extra costs. Almost 70 per cent said it would result in them having to impose wage freezes and consider reducing current employees’ salaries.
When you combine the Liberals’ retirement-savings tax grab (the premier calls it “an investment”) with the new $11 per hour minimum wage, it’s not hard to see why so many small- to medium-sized businesses are beginning to search for greener pastures.
A neighbour of mine runs two car washes, a donut store and a garage. He figures the Liberals’ new retirement-savings scheme is going to cost him $1,000 per employee per year. He’s also wondering if it’s worth his while staying in a province with a government so bent on playing us for suckers.
My stepson works at one of those car washes — cleaning out the bays, cutting the grass and taking out the garbage. Hard to say how much longer he’s going to have a job now, thanks to Premier Mom and the geniuses who came up with the Ontario Retirement Pension Plan.
Alberta, here we come …
Stephen Skyvington is the president of PoliTrain Inc. He can be heard every Saturday at 1 p.m. on CFRB Newstalk Radio 1010. Follow him on Twitter @SSkyvington.